The Impact of Energy Price Decline on China's Energy-Economy-Environment System Variables Using a CGE Model

In recent years, prices of coal and crude oil have fallen significantly. These declines have had a large impact on China’s energy-economy-environment system variables. This paper establishes a computable general equilibrium model to systematically analyse the impact of coal price changes alone or the decline of both coal and oil prices on the variables of China's energy-economy-environment system. The results of the analysis show that the decline of the coal price alone or of coal and crude oil prices together will lead to a significant increase in demand for either coal and total energy or coal, crude oil and total energy, including the related downstream energy products. Demand for natural gas, thermal power and clean power will decline. CO2 emissions and the carbon emission intensity per unit of GDP will remarkably increase, and the need for energy-saving and emissions-reduction will be even more severe. Most sectors’ outputs will rise by a certain degree, and the degree of increase due to the decline of coal and crude oil prices is larger than that from the decline of the coal price alone. Due to losses in the coal and crude oil sectors, the outputs will decline significantly. The decline of the coal price or of the coal and crude oil prices will lead to different degrees of impact on nominal and real macroeconomic variables. However, the real GDP will increase by a certain degree due to the decline of production costs.